What
is Vehicle insurance
(also
known as car insurance, motor insurance, or auto
insurance)
is insurance for cars, trucks, motorcycles,
and other road vehicles. Its primary use is to provide financial protection
against physical damage or bodily injury resulting from traffic collisions and
against liability that could also arise from incidents in a vehicle.
Vehicle insurance may additionally offer financial protection against theft of
the vehicle, and against damage to the vehicle sustained from events other than
traffic collisions, such as keying, weather or natural disasters, and
damage sustained by colliding with stationary objects. The specific terms of
vehicle insurance vary with legal regulations in each region.
History
Widespread
use of the motor car began after the First World War in urban areas.
Cars were relatively fast and dangerous by that stage, yet there was still no
compulsory form of car insurance anywhere in the world. This meant that injured
victims would rarely get any compensation in a crash, and drivers often faced
considerable costs for damage to their car and property.
A
compulsory car insurance scheme was first introduced in the United Kingdom with
the Road Traffic Act 1930. This ensured that all vehicle owners and
drivers had to be insured for their liability for injury or death to third
parties while their vehicle was being used on a public road.[1] Germany enacted
similar legislation in 1939 called the "Act on the Implementation of
Compulsory Insurance for Motor Vehicle Owners."[2]
Public policies
In
many jurisdictions, it is compulsory to have vehicle insurance before using or
keeping a motor vehicle on public roads. Most jurisdictions relate insurance to
both the car and the driver; however, the degree of each varies greatly.
Several
jurisdictions have experimented with a "pay-as-you-drive" insurance
plan which utilizes either a tracking device in the vehicle or vehicle
diagnostics. This could address issues of uninsured motorists by providing
additional options and also charge based on the distance driven, which could
theoretically increase the efficiency of the insurance, through streamlined
collection.[3]
Australia
In
Australia, every state has its own Compulsory Third-Party (CTP)
insurance scheme. CTP covers only personal injury liability in a vehicle
crash. Comprehensive and Third-Party Property Damage,
with or without Fire and Theft insurance, are sold separately.
· Comprehensive insurance
covers damages to third-party vehicles, other third-party property and the
insured vehicle.
· Third-Party
Property Damage insurance covers damage to third-party
property and vehicles, but not the insured vehicle.
· Third-Party
Property Damage with Fire and Theft insurance covers the
insured vehicle against fire and theft as well as damage to third-party
property and vehicles.
Compulsory
Third-Party Insurance
CTP
insurance is compulsory in every state in Australia and is paid as part of
vehicle registration. It covers the vehicle owner and any person who drives the
vehicle against claims for liability for death or injury to people caused by
the fault of the vehicle owner or driver. CTP may include any kind of physical
harm, bodily injuries and may cover the cost of all reasonable medical
treatment for injuries received in the crash, loss of wages, cost of care
services and, in some cases, compensation for pain and suffering. Each state in
Australia has a different scheme.
Third-Party
Property insurance or Comprehensive insurance covers the third party with the
repairing cost of the vehicle, any property damage or medication expenses as a
result of a crash by the insured. They are not to be confused with Compulsory
Third-Party insurance, which is for injuries or death of someone in a motor
crash.
In New
South Wales, each vehicle must be insured before it can be registered. It is
often called a 'greenslip'because of its colour. There are five licensed CTP
insurers in New South Wales. Suncorp holds licences for GIO and AAMI and
Allianz holds one licence. The remaining two licences are held by QBE and NRMA
Insurance (NRMA). APIA and Shannons and InsureMyRide insurance also supply CTP
insurance licensed by GIO.
A
privately provided scheme also applies in the Australian Capital Territory through
AAMI, APIA, GIO and NRMA. Vehicle owners pay for CTP as part of their vehicle
registration.
In Queensland,
CTP is included in the registration fee for a vehicle. There is a choice of
private insurer – Allianz, QBE, RACQ and Suncorp and price is government
controlled.[5]
In South
Australia, since July 2016, CTP is no longer provided by the Motor
Accident Commission. The government has now licensed four private insurers –
AAMI, Allianz, QBE and SGIC – to offer CTP insurance SA. Since July 2019,
vehicle owners can choose their own CTP insurer and new insurers may also enter
the market.[6]
There
are three states and one territory that do not have a private CTP scheme. In Victoria,
the Transport Accident Commission provides CTP through a levy in the
vehicle registration fee, known as the TAC charge. A similar scheme exists in Tasmania through
the Motor Accidents Insurance Board.[ A
similar scheme applies in Western Australia, through the Insurance
Commission of Western Australia (ICWA). The Northern Territory scheme is
managed through Territory Insurance Office (TIO).
Bangladesh[
For
all types of motor insurance policies in Bangladesh, the limit of
liability has been fixed by the law. Currently, the limits are too low to
compensate the victims. In respect of Act Only Liability Motor Vehicle
Insurance, the compensation for personal injuries and property damage to third
parties is BDT 20,000 for death, BDT 10,000 for severe injury, BDT 5,000 for
injury, and BDT 50,000 for property damage.[citation needed] The
limits are under review by the governmental bodies.[citation
needed]
Canada
Several
Canadian provinces (British Columbia, Saskatchewan, Manitoba and Quebec)
provide a public auto insurance system while in the rest of the
country insurance is provided privately. The third-party insurance is
privatized in Quebec and is mandatory. The province covers everything but the
vehicle(s).[8] Basic auto insurance
is mandatory throughout Canada (with some exceptions, such as government
vehicles[9]) with each province's government
determining which benefits are included as minimum required auto insurance
coverage and which benefits are options available for those seeking additional
coverage. Accident benefits coverage is mandatory everywhere except for Newfoundland
and Labrador.[10] All provinces in
Canada have some form of no-fault insurance available to crash
victims. The difference from province to province is the extent to which tort
or no-fault is emphasized. International drivers entering Canada are permitted
to drive any vehicle their licence allows for the three-month period for which
they are allowed to use their international licence. International laws provide
visitors to the country with an International Insurance Bond (IIB) until this
three-month period is over in which the international driver must provide
themselves with Canadian Insurance. The IIB is reinstated every time the
international driver enters the country. Damage to the driver's own vehicle is
optional – one notable exception to this is in Saskatchewan, where SGI provides
collision coverage (less than a $1000 deductible, such as a collision
damage waiver) as part of its basic insurance policy.[11] In
Saskatchewan, residents have the option to have their auto insurance through a
tort system but less than 0.5% of the population have taken this option.[12]
Facility
insurance policies are offered by the "facility association residual
market" (or "FARM"), as a last resort since auto insurance is
mandatory in Canada, for private and commercial high-risk drivers who cannot
buy a policy in the voluntary market (regular auto insurance). [13]
China
Traffic
Compulsory Insurance provides protection in the event of third party injuries,
third party property losses, etc. The minimum liability cover is RMB180,000 for
death and injury/per crash, RMB18,000 for medical expense, and RMB2,000 for
physical loss.[14] Additional 3rd Party
Liability Insurance also known as Commercial Motor Insurance provides extra
cover up to RMB10,000,000 excluding the driver and passengers.[citation
needed]> Driver and Passenger insurance covers
the driver and passengers, whilst Vehicle Damage and Theft Insurance covers
vehicle damage and the objects contained inside] Excess
Waiver Insurance is an additional option that waives any deductibles.
Some
differences apply in different regions:
Hong
Kong
According
to section 4(1) of the Motor Vehicles Insurance (Third-Party Risks) Ordinance
(Cap. 272 of the Laws of Hong Kong), all users of a car, include its permitted
users, must have insurance or some other security with respect to third-party
risks. Third party insurance protects the policyholder against liability of
death or bodily injury to third party up to HK$100,000,000 and/or damage to
third party property up to HK$2,000,000 as a result of crash arising out of the
use of the insured vehicle. Comprehensive Motor Insurance is also available.
Macau
The
mandatory minimum legal requirement Third Party Liability ("TPL")
Cover is MOP1,500,000 per crash and MOP30,000,000 per year, protecting against
the legal liability arising from a traffic crash causing loss and damages to
any third party.[citation needed].
Comprehensive Motor Insurance is also available.
European
Union
In
the European Union, the insurance is compulsory with minimum amounts:
· in
the case of personal injury, a minimum amount of cover of €1,000,000 per victim
or €5,000,000 per claim, whatever the number of victims;
· in
the case of damage to property, €1,000,000 per claim, whatever the number of
victims.[17]
In
some European languages, comprehensive insurance is known as casco
Germany
International Motor
Insurance Card (IVK)
Since
1939, it has been compulsory to have third-party personal insurance before
keeping a motor vehicle in all federal states of Germany.[2] In
addition, every vehicle owner is free to take out a comprehensive insurance
policy. All types of car insurance are provided by several private insurers.
The amount of insurance contribution is determined by several criteria, like
the region, the type of car or the personal way of driving.
The
minimum coverage defined by German law for car liability insurance /
third-party personal insurance is €7,500,000 for bodily injury (damage to
people), €500,000 for property damage and €50,000 for financial/fortune loss
which is in no direct or indirect coherence with bodily injury or property
damage.[22] Insurance companies usually offer
all-in/combined single limit insurance policies of €50,000,000 or €100,000,000
(about €141,000,000) for bodily injury, property damage and other
financial/fortune loss (usually with a bodily injury coverage limitation of
€8–15,000,000 for each bodily injured person).
Hungary
Third
party vehicle insurance is mandatory for all vehicles in Hungary. No exemption
is possible by money deposit. The premium covers all damage up to HUF 500m
(about €1.8m) per crash without deductible. The coverage is extended to HUF 1,250m
(about €4.5m) in case of personal injuries. Vehicle insurance policies from all
EU countries and some non-EU countries are valid in Hungary based on bilateral
or multilateral agreements. Visitors with vehicle insurance not covered by such
agreements are required to buy a monthly, renewable policy at the border.[citation
needed]
Indonesia
Logo of PT Jasa Raharja (Persero) since 1980[clarification needed]. This logo has since ubiquitously appeared in many traffic cones and temporary barriers nationwide.
Third-party
vehicle insurance is a mandatory requirement in Indonesia and each individual
car and motorcycle must be insured or the vehicle will not be considered legal;
this compulsory auto insurance is legally called the Road Traffic
Accidents Compulsory Coverage Fund (Indonesian: Dana Pertanggungan Wajib Kecelakaan Lalu Lintas
Jalan, DPWKLLJ). Therefore, a motorist cannot
drive the vehicle until it is insured. DPWKLLJ was introduced in 1964 and
merely covers body injuries, and is operated by a SOE called PT
Jasa Raharja (Persero) [id].[23] DPWKLLJ
is included, through an annual premium called the Compulsory Donation
to the Road Traffic Accident Fund (Indonesian: Sumbangan Wajib Dana Kecelakaan Lalu Lintas Jalan, SWDKLLJ)[citation
needed], in the annual vehicle tax which is paid to
the local Samsat (Sistem Administrasi Manunggal di bawah
Satu Atap), which is responsible for cars and roads.[citation
needed]
India
A sample Vehicle
Insurance Certificate in India
Auto
insurance in India covers the loss of or damage caused to the automobile or its
parts due to natural and man-made calamities. It provides accident
cover for individual owners of the vehicle while driving and also
for passengers and third party legal liability. There are certain
general insurance companies who also offer online insurance service for the
vehicle.<
Auto
insurance is a compulsory requirement for all new vehicles used whether for
commercial or personal use. Insurance companies have tie-ups with leading
automobile manufacturers. They offer their customers instant auto quotes.
Premiums are determined by a number of factors and the amount of premium
increases with the rise in the price of the vehicle. The claims of the auto
insurance in India can be accidental, theft claims or third party claims.
Certain documents are required for claiming auto insurance, like duly signed
claim form, RC[clarification needed] copy
of the vehicle, driving license copy, FIR[clarification
needed] copy, original estimate and policy copy.
There
are different types of auto insurance in India:
· Private
car insurance – the fastest growing sector in India as it is compulsory for all
new cars. The amount of premium depends on the make and value of the car, state
where the car is registered and the year of manufacture. This amount can be
reduced by asking the insurer for a no claim bonus (NCB) if no claim is made
for insurance in previous year. Two
wheeler insurance – covers accidental insurance for the driver of the vehicle.
The amount of premium depends on the current showroom price multiplied by the
depreciation rate fixed by the Tariff Advisory Committee at the beginning of a
policy period.
· Commercial
vehicle insurance – provides cover for all the vehicles which are not used for
personal purposes like trucks and HMVs. The amount of premium depends on the
showroom price of the vehicle at the commencement of the insurance period, make
of the vehicle and the place of registration of the vehicle.
Auto
insurance generally includes:
· Loss
or damage by crash, fire, lightning, self ignition, external explosion,
burglary, housebreaking or theft, malicious act
· Liability
for third-party injury/death, third-party property and liability to paid driver
· On
payment of appropriate additional premium, loss/damage to electrical/electronic
accessories
Auto
insurance generally does not include:
· Consequential
loss, depreciation, mechanical and electrical breakdown, failure or breakage
· When
the vehicle is used outside the geographical area covered by the policy
· War
or nuclear perils and drunken driving
Third
party insurance
Third
party insurance cover is mandatory under the Motor Vehicles Act, 1988. This
cover cannot be used for personal damages. This is offered at low premiums and
allows for third party claims under "no-fault liability". The premium
is calculated through the rates provided by the Tariff Advisory Committee. This
is a branch of the IRDA (Insurance Regulatory and Development Authority of
India). It covers bodily injury/accidental death and property damage.[citation
needed]
Ireland
The
Road Traffic Act, 1933 requires all drivers of mechanically propelled vehicles
in public places to have at least third-party insurance, or to have obtained
exemption – generally by depositing a (large) sum of money to the High Court as
a guarantee against claims. In 1933, this figure was set at £15,000.[25] The
Road Traffic Act, 1961[26] (which is
currently in force) repealed the 1933 act but replaced these sections with
functionally identical sections.
From
1968, those making deposits require the consent of the Minister for Transport
to do so, with the sum specified by the Minister.
Those
not exempted from obtaining insurance must obtain a certificate of insurance
from their insurance provider, and display a portion of this (an insurance
disc) on their vehicles' windscreen (if fitted).[27] The
certificate in full must be presented to a police station within ten days if
requested by an officer. Proof of having insurance or an exemption must also be
provided to pay for the motor tax.[28]
Those
injured or suffering property damage/loss due to uninsured drivers can claim
against the Motor Insurance Bureau of Ireland's uninsured drivers fund, as can
those injured (but not those suffering damage or loss) from hit and run offences.
Italy
The
law 990/1969 requires that each motor vehicle or trailer standing or moving on
a public road have third-party insurance (called RCA, Responsabilità
civile per gli autoveicoli). Historically, a part of the certificate of
insurance must be displayed on the windscreen of the vehicle. This latter
requirement was revoked in 2015, when a national database of insured vehicles
was built by the Insurance Company Association (ANIA, Associazione
Nazionale Imprese Assicuratrici) and the National Transportation Authority
(Motorizzazione Civile) to verify (by private citizens and public
authorities) if a vehicle is insured. There is no exemption policy to this law
disposition.
Driving
without the necessary insurance for that vehicle is an offence that can be prosecuted
by the police and fines range from 841 to 3,287 euros. Police forces also have
the power to seize a vehicle that does not have the necessary insurance in
place, until the owner of the vehicle pays a fine and signs a new insurance
policy. The same provision is applied when the vehicle is standing on a public
road.
Minimal
insurance policies cover only third parties (including the insured person and
third parties carried with the vehicle, but not the driver, if the two do not
coincide). Third parties, fire and theft is a common insurance
policy, while the all-inclusive policies (kasko policy) which
include also damages of the vehicle causing the crash or the injuries. It is
also common to include a renounce clause of the insurance company to compensate
the damages against the insured person in some cases (usually in case of DUI or
other infringement of the law by the driver).
The
victims of crashes caused by non-insured vehicles could be compensated by the
Road's Victim Warranty Fund (Fondo garanzia vittime della strada), which
is covered by a fixed amount (2.5%, as 2015) of each RCA insurance premium.
Netherlands
Third-party
vehicle insurance is a mandatory requirement for every vehicle in the
Netherlands.[citation needed] This
obligation is mandatory based on article 2 of the Wet
aansprakelijkheidsverzekering motorrijtuigen.[29] When
a vehicle is not insured the owner will receive a fine from the RDW (Netherlands
Vehicle Authority [nl]).[30] The
third-party vehicle insurance is called a WA verzekering where
WA stands for Wettelijke aansprakelijkheid which means legal
liability.[citation needed] In
general there are three types of auto insurance in the Netherlands: WA
verzekering (liability insurance), WA beperkt casco (limited
frame coverage), and WA vollledig casco (full frame coverage).
Limited frame and full frame coverage will provide more coverage against
certain additional risks which are not covered by the mandatory legal
third-party coverage. For example limited frame coverage will provide coverage
against damage caused by the weather such as storm and flooding. Also fire
damage and theft of the car is covered. Full frame coverage will provide
coverage against all risks mentioned plus damage to the car caused by the
driver himself.[citation needed]
New
Zealand
Within
New Zealand, the Accident Compensation Corporation (ACC) provides
nationwide no-fault personal injury insurance.[31] Injuries
involving motor vehicles operating on public roads are covered by the Motor
Vehicle Account, for which premiums are collected through levies on petrol and
through vehicle licensing fees.[32]
Norway
In
Norway, the vehicle owner must provide the minimum liability insurance for
his/her vehicle(s) – of any kind. Otherwise, the vehicle is illegal to use. If
a person drives a vehicle belonging to someone else and has a crash, the
insurance will cover for damage done. Note that the policy carrier can choose
to limit the coverage to only apply for family members or persons over a
certain age.
Romania[
Romanian
law mandates Răspundere Auto Civilă, a motor-vehicle liability insurance
for all vehicle owners to cover damages to third parties.[
Russian
Federation
Motor
vehicle liability insurance is mandatory for all owners in Russian legislation.
Insurance of the vehicle itself is technically voluntary, but may be mandated
in some circumstances, e.g. if the car is leased.
South
Africa
South
Africa allocates a percentage of the money from fuel into the Road
Accident Fund, which goes towards compensating third parties in crashes.[34][35]
Spain
Each
motor vehicle on a public road is required to have third party insurance
(called Seguro de responsabilidad civil).
Police
forces have the power to seize vehicles that do not have the necessary
insurance in place, until the owner of the vehicle pays the fine and signs a
new insurance policy. Driving without the necessary insurance for that vehicle
is an offence that will be prosecuted by the police and will receive a penalty.
The same provision is applied when the vehicle is standing on a public road.
The
minimum insurance policy covers only third parties (including the insured
person and third parties carried with the vehicle, but not the driver, if the
two do not coincide). Third parties, fire and theft is a
common insurance policy.
Victims
of accidents caused by non-insured vehicles may be compensated by a Warranty
Fund, which is covered by a fixed amount for each insurance premium.
Since
2013 it is possible to contract an insurance by days as is possible in
countries such as Germany and the UK.[36]
United
Arab Emirates[edit]
When
buying car insurance in the United Arab Emirates, the traffic department
requires a 13-month insurance certificate each time a person registers or
renews a vehicle registration. In Dubai, vehicle insurance is compulsory as per
the UAE RTA law.[37] There are two types of
motor insurance policies in Dubai, Third-Party Liability Insurance and
Comprehensive Motor Insurance.[citation needed]
It is
mandatory to have third-party liability insurance for every individual vehicle
owner in Dubai. This insurance policy is the most basic form of vehicle
insurance Dubai as it covers the third-party property damage or bodily injuries
caused by the insured vehicle.[citation needed]
Policyholder's
own vehicle damage such as fire, theft, and accidental collision is not covered
under the third-party liability insurance policy.[citation
needed]
United
Kingdom[edit]
Uninsured cars seized by Merseyside Police on display outside the force's headquarters in 2006
In
1930, the UK Government introduced a law that required every person who used a
vehicle on the road to have at least third-party personal injury insurance.
Today, this law is defined by the Road Traffic Act 1988,[38] (generally
referred to as the RTA 1988 as amended) which was last modified in 1991[citation
needed]. The Act requires that motorists either be
insured, or have made a specified deposit (£500,000 in 1991) and keeps the sum
deposited with the Accountant General of the Supreme Court, against liability
for injuries to others (including passengers) and for damage to other persons'
property, resulting from use of a vehicle on a public road or in other public
places.
It is
an offence to use a motor vehicle, or allow others to use it without insurance
that satisfies the requirements of the Act. This requirement applies while any
part of a vehicle (even if a greater part of it is on private land) is on the
public highway. No such legislation applies on private land. However, private
land to which the public have a reasonable right of access (for example, a
supermarket car park during opening hours) is considered to be included within
the requirements of the Act.
Police
have the power to seize vehicles that do not appear to have necessary insurance
in place. A driver caught driving without insurance for the vehicle he/she is
in charge of for the purposes of driving, is liable to be prosecuted by the
police and, upon conviction, will receive either a fixed penalty or
magistrate's courts penalty.
The
registration number of the vehicle shown on the insurance policy, along with
other relevant information including the effective dates of cover are
transmitted electronically to the UK's Motor Insurance Database (MID) which
exists to help reduce incidents of uninsured driving in the territory. The
Police are able to spot-check vehicles that pass within range of automated
number plate recognition (ANPR) cameras, that can search the MID instantly.
Proof of insurance lies entirely with the issue of a Certificate of Motor
Insurance, or cover note, by an Authorised Insurer which, to be valid, must
have been previously 'delivered' to the insured person in accordance with the
Act, and be printed in black ink on white paper.
The
insurance certificate or cover note issued by the insurance company constitutes
the only legal evidence that the policy to which the certificate relates
satisfies the requirements of the relevant law applicable in Great Britain,
Northern Ireland, the Isle of Man, the Island of Guernsey, the Island of Jersey
and the Island of Alderney. The Act states that an authorised person, such as a
police officer, may require a driver to produce an insurance certificate for
inspection. If the driver cannot show the document immediately on request, and
evidence of insurance cannot be found by other means such as the MID, then the
Police are empowered to seize the vehicle instantly.
The
immediate impounding of an apparently uninsured vehicle replaces the former method
of dealing with insurance spot-checks where drivers were issued with an HORT/1
(so-called because the order was form number 1 issued by the Home Office Road
Traffic dept). This 'ticket' was an order requiring that within seven days,
from midnight of the date of issue, the driver concerned was to take a valid
insurance certificate (and usually other driving documents as well) to a police
station of the driver's choice. Failure to produce an insurance certificate
was, and still is, an offence. The HORT/1 was commonly known – even by the
issuing authorities when dealing with the public – as a "Producer".
As these are seldom issued now and the MID relied upon to indicate the presence
of insurance or not, it is incumbent upon the insurance industry to accurately
and swiftly update the MID with current policy details and insurers that fail
to do so can be penalised by their regulating body.
Vehicles
kept in the UK must now be continuously insured unless a Statutory Off Road
Notification (SORN) has been formally submitted. This requirement arose
following a change in the law in June 2011 when a regulation known as
Continuous Insurance Enforcement (CIE) came into force. The effect of this was
that in the UK a vehicle that is not declared SORN, must have a valid insurance
policy in force whether or not it is kept on public roads and whether or not it
is driven
Insurer,
and Vehicle Excise Duty (VED) / licence data, are shared by the
relevant authorities including the police and this forms an integral part of
the mechanism of CIE. All UK registered vehicles, including those that are
exempt from VED (for example, Historic Vehicles and cars with low or zero
emissions) are subject to the VED taxation application process. Part of this is
a check on the vehicle's insurance. A physical receipt for the payment of VED
was issued by way of a paper disc which, prior to 1 October 2014, meant that
all motorists in the UK were required to prominently display the tax disc on
their vehicle when it was kept or driven on public roads. This helped to ensure
that most people had adequate insurance on their vehicles because insurance
cover was required to purchase a disc, although the insurance must merely have
been valid at the time of purchase and not necessarily for the life of the tax
disc.[40] To address the problems that arise
where a vehicle's insurance was subsequently cancelled but the tax disc
remained in force and displayed on the vehicle and the vehicle then used
without insurance, the CIE regulations are now able to be applied as the Driver
& Vehicle Licence Authority (DVLA) and the MID databases are shared in
real-time meaning that a taxed but uninsured vehicle is easily detectable by
both authorities and Traffic Police. From 1 October 2014, it is no longer a
legal requirement to display a vehicle excise licence (tax disc) on a vehicle.[41] This
has come about because the whole VED process can now be administered
electronically and alongside the MID, doing away with the expense, to the UK
Government, of issuing paper discs.
If a vehicle
is to be "laid up" for whatever reason, a Statutory Off Road
Notification (SORN) must be submitted to the DVLA to declare that the vehicle
is off the public roads and will not return to them unless the SORN is
cancelled by the vehicle's owner. Once a vehicle has been declared 'SORN' then
the legal requirement to insure it ceases, although many vehicle owners may
desire to maintain cover for loss of or damage to the vehicle while it is off
the road. A vehicle that is then to be put back on the road must be subject to
a new application for VED and be insured. Part of the VED application requires
an electronic check of the MID, in this way the lawful presence of a vehicle on
the road for both VED and insurance purposes is reinforced. It follows that the
only circumstances in which a vehicle can have no insurance is if it has a
valid SORN; was exempted from SORN (as untaxed on or before 31 October 1998 and
has had no tax or SORN activity since); is recorded as 'stolen and not
recovered' by the Police; is between registered keepers; or is scrapped.
Road
Traffic Act Only Insurance differs from Third-Party-Only
Insurance (detailed below) and is not often sold, unless to underpin,
for example, a corporate body wishing to self-insure above the requirements of
the Act. It provides the very minimum cover to satisfy the requirements of the
Act. Road Traffic Act Only Insurance has a limit of £1,000,000
for damage to third-party property, while third-party-only insurance typically
has a greater limit for third-party property damage.
Motor
insurers in the UK place a limit on the amount that they are liable for in the
event of a claim by third parties against a legitimate policy. This can be
explained in part by the Great Heck Rail Crash that cost the insurers
over £22,000,000 in compensation for the fatalities and damage to property
caused by the actions of the insured driver of a motor vehicle that caused the
disaster. No limit applies to claims from third parties for death or personal
injury, however UK car insurance is now commonly limited to £20,000,000 for any
claim or series of claims for loss of or damage to third-party property caused
by or arising out of one incident.
The
minimum level of insurance cover generally available, and which satisfies the
requirement of the Act, is called third-party-only insurance. The
level of cover provided by Third-party-only insurance is
basic, but does exceed the requirements of the act. This insurance covers any
liability to third parties, but does not cover any other risks.
More
commonly purchased is third party, fire and theft. This covers all
third-party liabilities and also covers the vehicle owner against the
destruction of the vehicle by fire (whether malicious or due to a vehicle
fault) and theft of the insured vehicle. It may or may not cover vandalism.
This kind of insurance and the two preceding types do not cover damage to the
vehicle caused by the driver or other hazards.
Comprehensive
insurance covers all of the above and damage to the vehicle
caused by the driver themselves, as well as vandalism and other risks. This is
usually the most expensive type of insurance. It is custom in the UK for
insurance customers to refer to their Comprehensive Insurance as "Fully
Comprehensive" or popularly, "Fully Comp". This is a tautology
as the word 'Comprehensive' means full.
Some
classes of vehicle ownership, or use, are "Crown Exempt" from the
requirement to be covered under the Act including vehicles owned or operated by
certain councils and local authorities, national park authorities, education
authorities, police authorities, fire authorities, health service bodies, the
security services and vehicles used to or from Shipping Salvage purposes.
Although exempt from the requirement to insure, this provides no immunity
against claims being made against them, so an otherwise Crown Exempt authority
may choose to insure conventionally, preferring to incur the known expense of
insurance premiums rather than accept the open-ended exposure of effectively,
self-insuring under Crown Exemption.
The Motor
Insurers' Bureau (MIB) compensates the victims of road crashes caused by
uninsured and untraced motorists. It also operates the MID, which contain
details of every insured vehicle in the country and acts as a means to share
information between insurance companies.
Soon
after the introduction of the Road Traffic Act in 1930, unexpected issues arose
when motorists needed to drive a vehicle other than their own in genuine
emergency circumstances. Volunteering to move a vehicle, for example, where
another motorist had been taken ill or been involved in a crash, could lead to
the "assisting" driver being prosecuted for no insurance if the other
car's insurance did not cover use by any driver. To alleviate this loophole, an
extension to UK Car Insurances was introduced allowing a Policyholder to
personally drive any other motor car not belonging to him/her and not hired to
him/her under a hire purchase or leasing agreement. This extension of cover,
known as "Driving Other Cars" (where it is granted) usually applies
to the Policyholder only. The cover provided is for Third-Party Risks only and
there is absolutely no cover for loss of, or damage to the vehicle being
driven. This aspect of UK motor insurance is the only one that purports to
cover the driving of a vehicle, not use.
On 1
March 2011, the European Court of Justice in Luxembourg ruled that gender could
no longer be used by insurers to set car insurance premiums. The new ruling
came into action from December 2012.[42]
Investigation
into repair costs and fraudulent claims
In
September 2012, it was announced that the Competition Commission had launched
an investigation into the UK system for credit repairs and credit hire of an
alternative vehicle leading to claims from third parties following an crash.
Where their client is considered to be not at fault, Accident Management
Companies will take over the running of their client's claim and arrange
everything for them, usually on a 'No Win – No Fee' basis. It was shown that
the insurers of the at-fault vehicle, were unable to intervene in order to have
control over the costs that were applied to the claim by means of repairs,
storage, vehicle hire, referral fees and personal injury. The subsequent cost
of some items submitted for consideration has been a cause for concern over
recent years as this has caused an increase in the premium costs, contrary to
the general duty of all involved to mitigate the cost of claims. Also, the
recent craze of "Cash for crash" has substantially raised the cost of
policies. This is where two parties arrange a collision between their vehicles
and one driver making excessive claims for damage and non-existent injuries to
themselves and the passengers that they had arranged to be "in the
vehicle" at the time of the collision. Another recent development has seen
crashes being caused deliberately by a driver "slamming" on their
brakes so that the driver behind hits them, this is usually carried out at
roundabouts, when the following driver is looking to the right for oncoming
traffic and does not notice that the vehicle in front has suddenly stopped for
no reason. The 'staging' of a motor collision on the Public Highway for the
purpose of attempting an insurance fraud is considered by the Courts to be
organised crime and upon conviction is dealt with as such.
United
States
Main
article: Vehicle insurance in the United States
The
regulations for vehicle insurance differ with each of the 50 US states and
other territories, with each U.S. state having its own mandatory minimum
coverage requirements (see separate main article). 48 U.S. states and
the District of Columbia require drivers to have insurance coverage for both
bodily injury and property damage, with New Hampshire and Virginia being the
exception, but the minimum amount of coverage required by law varies by state.
For example, minimum bodily injury liability coverage requirements range from
$30,000 in Arizona[43] to $100,000 in Alaska and Maine,[44] while
minimum property damage liability requirements range from $5,000 to $25,000 in
most states.
Malaysia
In
Malaysia, renewing car insurances is a very common thing. In general, there are
four types of car insurance available for Malaysians:
· Act
cover
This
is the minimum cover corresponding to the terms of the Road Transport Act 1987.
The insurance concerns the legal liability for death or physical injury to the
third party (not include the passengers), so it is hardly ever written by insurers.
· Third-party
coverage
This
type is compulsory to buy for every vehicle so it is the most basic and common
car insurance, which insures you against claims for the injury or damage to the
third party or its property in a crash.
· Third-party,
fire, and theft coverage
In
addition to third-party coverage, this policy also provides insurance for your
own vehicle due to fire, crash or theft.
· Comprehensive
coverage
This
policy provides the widest coverage, i.e. the third party's physical injury and
death, third party's vehicle damage and your own vehicle's damage caused by
fire, theft or a crash. This type of insurance is usually designed for luxury
vehicles.
Coverage levels
Vehicle
insurance can cover some or all of the following items:
· The
insured party (medical payments)
· Property
damage caused by the insured
· The
insured vehicle (physical damage)
· Third
parties (car and people, property damage and bodily injury)
· Third
party, fire and theft
· In
some jurisdictions coverage for injuries to persons riding in the insured
vehicle is available without regard to fault in the auto crash (No Fault Auto
Insurance)
· The
cost to rent a vehicle if yours is damaged.
· The
cost to tow your vehicle to a repair facility.
· Crashes
involving uninsured motorists.
Different
policies specify the circumstances under which each item is covered. For
example, a vehicle can be insured against theft, fire damage, or crash damage
independently.
If a
vehicle is declared a total loss and the vehicle's market value is
less than the amount that is still owed to the bank that is financing the
vehicle, GAP insurance may cover the difference. Not all auto
insurance policies include GAP insurance. GAP insurance is often offered by the
finance company at time the vehicle is purchased.
Excess
An
excess payment, also known as a deductible, is a fixed contribution that
must be paid each time a car is repaired with the charges billed to an automotive
insurance policy. Normally this payment is made directly to the crash repair
"garage" (the term "garage" refers to an establishment
where vehicles are serviced and repaired) when the owner collects the car. If
one's car is declared to be a "write-off" (or "totaled"),
then the insurance company will deduct the excess agreed on the policy from the
settlement payment it makes to the owner.
If
the crash was the other driver's fault, and this fault is accepted by the third
party's insurer, then the vehicle owner may be able to reclaim the excess
payment from the other person's insurance company.
The
excess itself can also be protected by a motor excess insurance policy.[citation
needed]
Compulsory
excess
A
compulsory excess is the minimum excess payment the insurer will accept on the
insurance policy. Minimum excesses vary according to the personal details,
driving record and the insurance company. For example, young or inexperienced
drivers and types of incident can incur additional compulsory excess charges.
Voluntary
excess
To
reduce the insurance premium, the insured party may offer to pay a higher
excess (deductible) than the compulsory excess demanded by the insurance
company. The voluntary excess is the extra amount, over and above the
compulsory excess, that is agreed to be paid in the event of a claim on the
policy. As a bigger excess reduces the financial risk carried by the insurer, the
insurer is able to offer a significantly lower premium.
Basis of premium charges
Main
article: Auto insurance risk selection
Depending
on the jurisdiction, the insurance premium can be either mandated by the
government or determined by the insurance company, in accordance with a
framework of regulations set by the government. Often, the insurer will have
more freedom to set the price on physical damage coverages than on mandatory
liability coverages.
When
the premium is not mandated by the government, it is usually derived from the
calculations of an actuary, based on statistical data. The premium can
vary depending on many factors that are believed to affect the expected cost of
future claims.[45] Those factors can
include the car characteristics, the coverage selected (deductible, limit,
covered perils), the profile of the driver (age, gender, driving history)
and the usage of the car (commute to work or not, predicted annual distance
driven).[46]
Neighbourhood
The
address of the owner can affect the premiums. Areas with high crime rates
generally lead to higher costs of insurance.[47][48]
Gender
Because
male drivers, especially younger ones, are on average often regarded as tending
to drive more aggressively, the premiums charged for policies on vehicles whose
primary driver is male are often higher. This discrimination may be dropped if
the driver is past a certain age.[citation needed]
On 1
March 2011, the European Court of Justice decided insurance companies
who used gender as a risk factor when calculating insurance premiums were
breaching EU equality laws.[49] The Court ruled
that car-insurance companies were discriminating against men.[49] However,
in some places, such as the UK, companies have used the standard practice of
discrimination based on profession to still use gender as a factor, albeit
indirectly. Professions which are more typically practised by men are deemed as
being more risky even if they had not been prior to the Court's ruling while
the converse is applied to professions predominant among women.[50] Another
effect of the ruling has been that, while the premiums for men have been
lowered, they have been raised for women. This equalisation effect has also
been seen in other types of insurance for individuals, such as life
insurance.[51]
Age[
Teenage
drivers who have no driving record will have higher car insurance premiums.
However, young drivers are often offered discounts if they undertake further
driver training on recognized courses, such as the Pass Plus scheme
in the UK. In the US many insurers offer a good-grade discount to students with
a good academic record and resident-student discounts to those who live away
from home. Generally insurance premiums tend to become lower at the age of 25.
Some insurance companies offer "stand alone" car insurance policies
specifically for teenagers with lower premiums. By placing restrictions on
teenagers' driving (forbidding driving after dark, or giving rides to other
teens, for example), these companies effectively reduce their risk.[citation
needed]
Senior
drivers are often eligible for retirement discounts, reflecting the lower
average miles driven by this age group. However, rates may increase for senior
drivers after age 65, due to increased risk associated with much older drivers.
Typically, the increased risk for drivers over 65 years of age is associated
with slower reflexes, reaction times, and being more injury-prone.
U.S.
driving history[
In
most U.S. states, moving violations, including running red lights and speeding,
assess points on a driver's driving record. Since more points indicate an increased
risk of future violations, insurance companies periodically review drivers'
records, and may raise premiums accordingly. Rating practices, such as debit
for a poor driving history, are not dictated by law. Many insurers allow one
moving violation every three to five years before increasing premiums. Crashes
affect insurance premiums similarly. Depending on the severity of the crash and
the number of points assessed, rates can increase by as much as twenty to
thirty percent.[citation needed] Any
motoring convictions should be disclosed to insurers, as the driver is assessed
by risk from prior experiences while driving on the road.
Marital
status
Statistics
show that married drivers average fewer crashes than the rest of the population
so policy owners who are married often receive lower premiums than single
persons.
Profession
The
profession of the driver may be used as a factor to determine premiums. Certain
professions may be deemed more likely to result in damages if they regularly
involve more travel or the carrying of expensive equipment or stock or if they
are predominant either among women or among men.
Vehicle
classification
Two
of the most important factors that go into determining the underwriting risk on
motorized vehicles are: performance capability and retail cost. The most
commonly available providers of auto insurance have underwriting restrictions
against vehicles that are either designed to be capable of higher speeds and
performance levels, or vehicles that retail above a certain dollar amount.
Vehicles that are commonly considered luxury automobiles usually carry more
expensive physical damage premiums because they are more expensive to replace.
Vehicles that can be classified as high performance autos will carry higher
premiums generally because there is greater opportunity for risky driving
behavior. Motorcycle insurance may carry lower property-damage premiums because
the risk of damage to other vehicles is minimal, yet have higher liability or
personal-injury premiums, because motorcycle riders face different physical
risks while on the road. Risk classification on automobiles also takes into
account the statistical analysis of reported theft, accidents, and mechanical
malfunction on every given year, make, and model of auto.
Distance
Some
car insurance plans do not differentiate in regard to how much the car is used.
There are however low-mileage discounts offered by some insurance providers.
Other methods of differentiation would include over-road distance between the
ordinary residence of a subject and their ordinary, daily destinations.
Reasonable
distance estimation
Another
important factor in determining car insurance premiums involves the annual
mileage put on the vehicle, and for what reason. Driving to and from work every
day at a specified distance, especially in urban areas where common traffic
routes are known, presents different risks than how a retiree who does not work
any longer may use their vehicle. Common practice has been that this
information was provided solely by the insured person, but some insurance
providers have started to collect regular odometer readings to verify
the risk.
